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Puerto Rico fiscal plan includes substantial public payroll cut

By on March 23, 2018

SAN JUAN – The Puerto Rico government plans to significantly cut its 100,000-public employees’ payroll over the next six years via attrition, the government as a single employer law and early retirement windows.

The action is one of the proposals included in the fiscal plan that will be submitted to the island’ Financial Oversight and Management Board on Friday, but that is not expected to be made public by Gov. Ricardo Rosselló Nevares and his economic team, headed by the executive director of the Fiscal Agency and Financial Advisory Authority (Aafaf), Gerardo Portela, and the governor’s representative to the fiscal board, Christian Sobrino.

“I think in 118 agencies, the right-sizing, or this government engineering, contemplates…a more efficient government, more effective, more agile–to 35 agencies,” Portela said during a roundtable with the press, adding that some $1.45 billion was expected to be saved.

Gerardo Portela, executive director of the Puerto Rico Fiscal Agency & Financial Advisory Authority (Juan José Rodríguez/CB)

According to officials, the fiscal plan contemplates the gradual decrease of jobs within the government over a period of years.

The fiscal plan includes the recently announced labor and tax reforms, in addition to considering a population reduction of 11% for the next six years. Taking into account the current population of 3.3 million to 3.4 million, the percentage represents some 350,000 people.

The new fiscal plan assumes a surplus of $5.5 billion over that period of time, which greatly exceeds the $3.3 billion of the previous fiscal plan, which was for five years.

The administration said it will also make public the fiscal plans for the Electric Power Authority (Prepa), Aqueduct & Sewer Authority (Prasa), the Highways & Transportation Authority (HTA) and the Cooperatives Supervision & Insurance Corp. (Cossec) by its Spanish acronym.

The government continues to negotiate the Government Development Bank’s restructuring support agreement with creditors, thus its fiscal plan will not be released.

The proposed structural reforms are forecast to produce “additional economic growth” of 1.8%. However, the revised plan forecasts an economic decline of 10.8% for fiscal year 2018, then growth of 7.9% in fiscal 2019.

Despite the fiscal board’s recommendation to cut pensions by 10%, the governor said he remains steadfast on his position to fund them.

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